Tax on Deposit Interest in Korea: How the 15.4% Works and What You Actually Receive

If you have ever opened a Korean deposit account and found less interest credited than you calculated, the reason is usually tax. Korean banks withhold tax on interest before paying it out, so the amount you see is already net. The rate is fixed and the arithmetic is simple, but comparing advertised rates without accounting for it will give you the wrong expectation.

What the 15.4% is made of

Interest is treated as income in Korea, so it is taxed. Unlike employment income, however, there is no year-end filing for most people. The bank withholds the tax when it pays the interest and remits it on your behalf. This is called withholding at source. It is convenient, but it also means the deduction is easy to overlook.

Article 129(1) of the Income Tax Act sets the rate on general interest income at 14 percent. A local income tax equal to 10% of that amount is added, bringing the combined rate to 15.4%.

Because the rate is fixed, the calculation is straightforward. Multiply the pre-tax interest by 15.4% and that is the tax; the remainder is yours. Note that the tax applies to the interest only, never to the principal. Your principal is returned in full.

What you actually receive, by principal

As of the 2026-07 disclosure, one of the highest 12-month time deposit rates available without visiting a branch is 4.5% from 엔에이치저축은행 (NH특판정기예금(모바일)), before tax. Applying that rate across different principal amounts gives the following.

Simple interest, 12-month maturity, straightforward calculation. Actual payouts vary slightly with day-count conventions and the product’s interest payment method.

The deduction scales with the principal. At KRW 10,000,000 the tax is KRW 69,300, which is easy to shrug off. At KRW 100 million the tax alone comes to KRW 693,000. The larger the sum, the more the after-tax figure is the one that matters.

The after-tax yield

Every advertised rate in Korea is quoted before tax. Adjusting for withholding, a headline rate of 4.5% becomes an effective 3.807% after tax, a difference of 0.693 percentage points.

When you are choosing between two products this does not change the ranking, since both are taxed the same way. Where it matters is in setting expectations. If you are budgeting around what a deposit will actually earn you, convert to the after-tax figure first.

When comprehensive taxation kicks in

For most savers, the 15.4% withholding is the end of the matter. If your total financial income for the year exceeds KRW 20,000,000, however, the excess is combined with your other income and taxed comprehensively. The threshold counts interest and dividends together.

To generate KRW 20,000,000 in interest alone at 4.5%, you would need roughly KRW 444,444,444 in principal. Few people reach that on deposits alone, but because dividends count toward the same threshold, investors can get there sooner than expected.

One useful detail: a spouse’s financial income is not aggregated with yours. Each person is assessed separately.

Practical ways to reduce the tax

Spread maturities across calendar years

Financial income is recognised in the year the interest is actually paid. If several deposits mature in the same year, that year’s total spikes. Staggering maturities across years keeps any single year’s figure lower. This only matters if you are near the comprehensive taxation threshold.

Split holdings between spouses

Since spouses are assessed separately, dividing funds that are concentrated in one name can keep each person under the threshold. Be aware that transfers above certain amounts may raise gift tax considerations and warrant separate advice.

Check tax-exempt and preferential products

Some products carry no tax on interest, or a reduced rate, for savers who meet age or income requirements. Eligibility rules and limits differ by product, so confirm directly with the financial institution. Where you qualify, this is the largest saving available, since it removes the 15.4% entirely.

Savings accounts are calculated differently

With a time deposit you place a lump sum at the start, so the full principal earns interest for the whole term. With an installment savings account you contribute monthly, meaning early contributions sit for longer and later ones for only a month or two. The same headline rate therefore produces less interest on a savings account than on a deposit. The tax rate is identical at 15.4%, but the pre-tax interest it applies to is smaller.

Frequently asked questions